United Airlines on Track to Add Basic Economy Fares in 2016

Now that they’re finally profitable, the race is on for all U.S. legacy carriers to segment economy fares and better complete against low-cost carriers.

— Andrew Sheivachman

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Despite the drama surrounding the departure of United Airlines CEO Jeff Smisek and the delayed integration of new CEO Oscar Munoz, the company is still on track to roll out basic economy fares this year, in order to compete against its legacy carrier peers and low-cost carrier competitors in major U.S. markets.

The challenge, however, is preparing consumers for additional fare options and ensuring that travel agents have access to the new fares through their booking tools.

“We’ll look for the second half of 2016 to roll out entry level fares, that’s obviously a great opportunity to improve segmentation in the marketplace,” said Jim Compton, United’s chief revenue officer, this week at Wolfe Research’s 9th annual Global Transportation Conference. “What we’re really focused on is that we communicate to the traveler what they’re going to purchase so that there’s a true understanding of what comes with whatever they’re buying; whether it’s a product that includes more of the travel experience features around it, or it’s an entry level fare that has less of them. What we want to avoid is a confusion in the marketplace and move [that confusion] to the gate agent.”

Denver and San Francisco are seeing the greatest growth for the airline right now, while growth in Houston has been limited by the hurting oil business.

Executives at the the conference also reflected on Munoz’s leadership and whether he is imparting any lessons learned during his previous gig at railroad company CSX.

“Oscar [Munoz] brought with him a number of lessons learned in terms of what works and doesn’t work in the way the leaders of the company should manage the business, for example the focus on the fact that we’re an operating company, like a railroad,” said acting United CFO Gerry Laderman. “The importance of staying connected with the frontline is probably the biggest [lesson]. In terms of very specific initiatives… efficiency is a big focus.”

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